Asian shares rise before German ruling, Fed meeting
2012/09/12TOKYO (Reuters) - Asian shares rose to three-week highs on optimism that a German court will approve the legality of the euro zone's bailout fund later on Wednesday and the U.S. Federal Reserve may deliver further stimulus measures this week.
Risk momentum was supported by comments from Premier Wen Jiabao on Tuesday that China is on track to meet this year's target for economic growth and if needed, the government could utilize a 100 billion yuan ($15.8 billion)fiscal stability fund to boost growth.
Wen's comments followed weekend remarks from President Hu Jintao that China would do all it could to help a global recovery by rebalancing its economy, Asia's biggest and the world's second-largest.
The Australian dollar, a typical gauge of risk appetite and highly sensitive to the economic health of Australia's largest export destination, China, climbed to a three-week high of $1.0474.
MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> added 1.1 percent, led by Chinese and Korean shares. Shanghai shares (.SSEC) rose 0.4 percent while Hong Kong (.HSI) were up 0.8 percent. Seoul shares (.KS11) were also up 1.5 percent and hit a three-week high, with Europe-sensitive shipbuilders among the best performers. Australian shares (.AXJO) rose 0.7 percent as banks advanced.
Germany's Constitutional Court said on Tuesday that it will go ahead with a ruling on Wednesday on the European Stability Mechanism (ESM) and budget rules.
Markets are anticipating an approval, which would help facilitate the European Central Bank's bond-buying program aimed at capping soaring borrowing costs in euro zone members that ask for a bailout.
A favorable court decision would show European sovereign debt and banking issues "are being addressed in a more robust form and obviously would be positive for banks there and banks here," said Peter Warnes, head of equities at Morningstar, adding that it will signal "the market is freeing up a bit."
Japan's Nikkei average (.N225) soared 1.5 percent. (.T)
The Fed begins its two-day policy meeting on Wednesday.
Markets widely expect some type of monetary stimulus to underpin the fragile U.S. economy ranging from a powerful bond buying known as quantitative easing (QE) to further extending the Fed's commitment to keeping interest rates near zero.
"Investors are betting on the Fed's third round of quantitative easing following the weak jobs data," Kim Joo-hyung, an analyst at Tong Yang Securities, said.
DOLLAR SOFTENS
The dollar index (.DXY) measured against a basket of key currencies hovered close to a four-month low of 79.794 touched on Tuesday, weighed by expectations for more Fed easing and a warning from Moody's Investors Service that the United States, the world's biggest economy, may lose its top AAA rating if next year's budget talks do not produce policies to cut its debts.
Standard & Poor's cut the top-notch rating for the U.S. in August 2011.
The dollar recovered 0.1 percent against the yen at 77.87, after slipping to a 3-1/2 month low of 77.70 on Tuesday, while the euro was at $1.2862, off a four-month high of $1.2872 hit on Tuesday.
Sebastian Galy, strategist at Societe Generale, said in a note that gold and dollar/yen will likely be most sensitive to the quantitative easing, and to lesser extent in the Australian dollar and the euro.
A weaker dollar continued to underpin most dollar-based commodities on Wednesday
U.S. crude narrowed earlier losses to trade down 0.1 percent at $97.06 a barrel while Brent recouped earlier losses to trade steady around $115.43. (O/R)
Spot gold inched up 0.2 percent to $1,734.51 an ounce, not far from Friday's peak of $1,741.30, its highest since February 29.
London copper edged higher to extend gains to a fourth session, trading around $8,086 a metric ton.
Rallies in riskier assets bolstered sentiment in Asian credit markets, narrowing the spread on the iTraxx Asia ex-Japan investment-grade index by 8 basis points to its tightest level since August last year.
(Additional reporting by Thuy Ong in Sydney and Hyunjoo Jin in Seoul; Editing by Richard Borsuk)
